Abstract

Predicated on economic theory predicting that firms and labor markets discipline individual employees, banks paid record civil penalties for their role in fraudulent RMBS underwriting. We find no evidence that senior RMBS bankers at top banks suffered from lower job retention, fewer promotions, or worse job opportunities at other firms compared to their counterparts in non-fraudulent areas. The findings do not appear to be driven by targeted employee discipline, discipline following public scrutiny, smaller fines, or purely a desire to protect employees due to pending litigation. The evidence is most consistent with implicit upper-management approval of RMBS activities.